Tuesday, 6 April 2010

Don't sacrifice the assets agenda to austerity, say think-tanks of left and right

As the 2010 election campaign gets underway, politicians of every party will argue that inequality matters and that they want to kickstart social mobility in Britain. Think-tanks across the political spectrum are warning that the credibility of this ambition depends on refusing to sacrifice long-term policies to spread assets more fairly to fiscal austerity.

The Fabian Society and ippr claim co-paternity of the Child Trust Fund - which creates a fund for every baby which they receive at age 18 - and have joined forces again to defend the idea from being snatched away in its infancy, also engaging the progressive Conservative project at Demos in defending a stronger role for asset-based policies to address wealth inequalities. And the new ResPublica think-tank also argues, in Phillip Blond's new book Red Tory, for an extension of the Child Trust Fund and other asset policies, arguing that "recapitalising the poor" should be a central policy focus.

Thinkers of both left and right are calling for policies to reduce asset inequalities to be funded from the proceeds of inheritance tax, or from making current support for saving through pensions relief much fairer.

The Conservatives propose to restrict the scheme to the poorest families, while the Liberal Democrats pledge the Child Trust Fund's abolition. Stuart White of Oxford University, an expert on asset policies, said this contradicted the long-standing liberal goal of "ownership for all".

Although the sums involved are quite modest, it has given us the reasonable hope that all British young adults will be able to start their adult lives with some capital for all - and makes real the old slogan of ownership for all".

Carey Oppenheim, co-director of ippr, warned that politicians could expediently see the Child Trust Fund and asset based policies as "a relatively easy cut" - less visible than school places or public servies - but argued this would sell out a long-term vision.

"The Child Trust Fund came from an understanding that assets have a profound impact on opportunities, choices and how you manage your setbacks. That is a common sense intuition - and there is a lot of evidence that supports that intuition: an important asset effect.

We need more asset based policies and not less. We are facing some of the highest levels of wealth inequality that this country has ever experienced. The CTF is very well attuned from a world where people expect more individual and personal choices; and to a world in which we think about how our economy should function, and how we make it more innovative and creative policy:

Julian Le Grand, author of the Fabian pamphlet A Capital Idea in 2000, said concern about wealth inequalities showed that that the fairness arguments for investing in asset based welfare were now stronger than they were a decade ago:

We pour millions into education - primary, secondary, universities - so that children and young adults receive human capital. That is important and right, and we should go on doing it, though there is an argument that we are reaching the point

It is heavily regressive: it benefits the better off far more than the poor, particularly people who leave at 16 or who do not go on at 18 do not receive that massive subsidy of efforts to accumulate human capital.

So one argument for the Child Trust Fund is that it is fundamentally a more equitable way of assisting those who may not benefit from university education or higher education. The second is that very small amounts of capital have enormous impacts on people's life chances - their ability to do many things or to start a business.

Le Grand said that the policy spoke to issues of financial instability, debt and financial literacy which were among the causes of the financial crash and recession.

Julian Le Grand also said that he had asked Ed Miliband why a 'crank' idea at the margins of debate in 2000 had become government policy by 2003, and had been told that two think-tanks advocating the same idea had given it more weight! He also

Jonty Oliff-Cooper of Demos told the Fabian/ippr meeting that progressive Conservatives should be very strongly for an increased focus on assets in addressing wealth inequalities.

"Assets encourage people being forward looking and make people more responsible. They improve engagement in society", he said.

Oliff-Cooper said that he wanted to replace the Child Trust Fund with a reformed scheme, arguing that there should be restrictions on how the money could be spent at 18 - such as for education, property or starting a business - and that there should be a higher emphasis not just on tax relief, but on

But he agreed with Carey Oppenheim, who had also argued for greater matching of savings, that these were essentially calls for reform rather than abolition.

David White of the Children's Mutual said there was strong evidence that the policy had been successful.

The key to its success is that it is universal. There is a fairness in investing in all of children's families. We can't tell which families born into high income families will be in difficult circumstances at 18, or which children born to low income families will be much better off.

The panellists expressed concerns that restricting the policy

"If you are going to keep it, it should be universal", said Oliff-Cooper, though recognising that the principle was challenged by fiscal circumstances.

Julian Le Grand's proposed that the Child Trust Fund should be linked to and hypothecated from inheritance tax, arguing this would make inheritance tax more saleable and would make sense

Oliff-Cooper said progressive Conservatives should support that proposal.

"I think its a great idea to think about linking to inheritance tax in some way. We are supporters of a more banded system of inheritance tax. Of all of the taxes, I think it is one of the best ones", he said.

Carey Oppenheim said the financial case for the policy could be made in a fiscal squeeze:

The particular question is: "Is it wasteful in 2010? I would say it isn't - as it is comparatively small, including in relation to other things which have not yet proved their worth in terms of social mobility. I just think it is political expediency - it is easier to cut because there are not immediate losers - but the evidence is that it is good value for money and has enormous potential to make a difference", said Carey Oppenheim

How do we convey and create a set of messages which create a popular appeal for this one? I wonder if people realise it is there?

Sunder Katwala, General Secretary of the Fabians said the argument needed to be a less technical and policy-focused one.

There is a disconnect between public debates in this area. People are very concerned at the idea that you will only become a home-owner if you have support from the bank of mum and dad. Perhaps they don't know about this policy: we need to dramatise the point that, for the first time, everybody will at least have something when they turn 18, and argue against that being taken away.

Carey Oppenheim argued that asset-based policies were capable of building consensus across politics: the argument for greater fairness, for encouraging independence and responsibility, and young adults' control over their own lives should be supported from different parts of the political spectrum, sometimes for different reasons or with different emphases.

Stuart White said that the discussion showed the opportunity to build consensus around the importance of spreading assets, and also the value of matched-savings in asset policies.

"It is also very interesting to see agreement on the value of inheritance tax at a philosophical level, which is not something we often see in political and public debate", he said.

Stuart had also suggested that the vision behind the ownership for all was one of the best ways to explain the motivation for the policy:

We give a huge boost to "ambition formation" but especially to the better off. Part of the aim is to make that - the chance to ask yourself seriously 'what do I want to do with my life'- universal.

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